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Guess I'm fence straddler. Like you, I depend upon a mix of sytem and
discretion. I've found it easy to get tripped up by my own ideas of where the
market is going so I use a system to keep me in tune with the market; thus I'm
unlikely to sustain catastrophic losses. I track action independently of my
system using trendline and fib techniques so I don't get blindsided by the
system or the market. If the system seems to be tracking the market well, I run
with the system. If I miss a trade, I won't chase the market. If the market is
uncertain, I stand aside until it has conviction. I do a lot of intermarket work
across equity and financial indexes checking for confirmations and divergences.
I only trade against my system on rare occasion when my trendline, fib, and
intermarket work shows the market is changing and then I get out quickly if
things don't go my way.
As I'm moving from position trading stocks to position trading the S&P, I find
myself compensating for the increased (but not excessive) leverage by sharpening
both my systems and my trading skills. Because my basic trading techniques
(trendlines and fibs) are based upon the price and volume of the index I'm
trading, I tend to build systems which use data independent of the price series
I'm trading such as other indexes, breadth, and rates.
Earl
-----Original Message-----
From: Gwenn Ael Gautier <Gw.Gautier@xxxxxxxxxx>
To: Earl Adamy <eadamy@xxxxxxxxxx>
Cc: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>; Tom Cathey <K1JJ@xxxxxxx>
Date: Sunday, March 15, 1998 12:16 PM
Subject: System & Discretionary Trading
Here's my way of doing things:
- I am too stupid to figure out when what to buy, sell, so I leave that to a
system.
- I am too stupid to figure out which signals are good, which are not, so I take
them all.
- I am too stupid to figure out how much to buy, so I leave that to a money
management algorythm I have done with Excell.
- I am good at execution so I decide when to execute. This is discretionnary.
Upon
a buy signal, I view the market from a long point of view, and I feel absolutely
compelled to buy. Usually I am not too inspired so I just buy roughly at the
systems entry price. But sometimes I let a small adverse trend run, and buy
cheaper. Occasionally I miss the entry, so I chase a bit and enter with big
slippage. But all in all, I have about zero costs, as I make also my commissions
back.
- I am too stupid to figure out how far this trade may just go, so I simply wait
for the exit, and do other things in the meantime: read, listen to music, mow
the
lawn, wash the car, play video games, else.
- But sometimes the market gets a bit ahead of itself, or there are nice Elliott
setups, and I become discretionnary again. I exit the position at limit, I wait
for
the market to calm down again, and as soon as I don't know anymore what's going
on,
I go back in. Remember, I was compelled to be long.
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